Saturday, 21 February 2015

Aussie lawyers Slater & Gordon in exclusive talks to buy Quindell's legal services division - part 11

I have had a few readers get in touch asking for an update on the Quindell situation, so here it is:

I'm told by excellent sources that talks between Slater & Gordon and Quindell (and also their investment banking advisers at Greenhill and NM Rothschild) about a deal for the Aim-listed company's legal services division are getting hot and heavy i.e very serious.

Don't, though, get too excited because after a period of due diligence, Slater & Gordon has indicated that it may only be willing to pay around £700 million for Quindell's legal services unit, according to well-placed sources. Apparently, the majority of the potential offer will be in cash.

In case you don't recall, Slater & Gordon originally indicated to Quindell back in November 2014 that it could be willing to pay six times sustainable EBITDA (earnings before interest, tax, amortisation and depreciation). Given the legal division was/is generating about £180 million of EBITDA, the original indicative approach from Slater & Gordon valued the unit at around £1billion.

So, the new potential price of £700 million is significantly lower than what was indicated in the original approach (a statement of the obvious, I know). Indeed, one adviser following the situation described it is a "bit of a cheeky bid".

Still, £700 million is double the company's current market capitalisation of £320 million, so I guess it's not to be sniffed at.

Quindell's board is scheduled to meet early next week, according to my sources familiar with the matter.

However, it's not clear whether Slater & Gordon will be able to get its act together in time to submit a formal offer for the Quindell board to consider next week.

The other uncertainty is that if the Aussies do pitch their bid for Quindell legal services at £700 million, the board may not be able to recommend the deal to shareholders because it's not high enough.

Some analysts reckon £800 million is the minimum Quindell's board would deem acceptable for its legal services unit.

Both Quindell and Slater & Gordon declined to comment.

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